2: Contract Formation Flashcards
What is a simple contract?
A contract that does not need to be in writing (oral)
Consideration may be sufficient, not adequate
Seller owes no duty to buyer!
Principle of caveat emptor (buyer aware) means the buyer cannot protect themselves
4 types of contract that must be in writing?
Bills of exchange
Regulated Customer Credit Agreement
Transfers of land (evidenced by deed, a speciality contract)
Guarentees
3 times where people do not have capacity for contract?
A minor (under 18) is voidable
Unsound mind and drunkards do not have the capacity to enter into contracts
What is a void contract?
Not a contract at all!
Ie. illegal contracts, ones contrary to public policy
What is a voidable contract? When does this happen?
One that can be set aside at the choice of the injured party
- Lack of capacity
- Lack of free will
- Contract made due to a representation
What is an unenforceable contract!
A valid contract, but if either party fails to fulfil their part of the contract, may not be able to compel them to do so
Cant be enforced
- contract not in the correct form
- must be in writing but not in writing
What terms must be in a contract?
Whatever terms the parties wish!
Courts may intervene if the one party gets unfair advantage due to a stronger bargaining position
What is a contract?
A legal agreement between two or more parties
What are the four elements of a contract?
Offer
Acceptance
Consideration
Intention to be legally bound
What is an offer?
A definite promise to be bound on specific terms
Made by the offeror to the offeree
Offeree can be a particular person, a class of persons, or even the whole world!
What is NOT an offer?
Invitation to treat/tender
Statement of intention
Supply of information
Request for information
Vague statements
6 types of invitation to treat?
Most adverts
Shop window displays
Goods on shop shelves
Company prospectus
Circulation of price list or displays on a website
Tenders
What are the four types of offer termination?
Rejection and counter offer
Revocation
Lapse of time
Failure of a pre-condition
What is rejection?
An offeree turns down the original offer
Can be express or by way of a counter offer
Request for new info about the offer is not rejection!
What is revocation?
When an offeror withdraws his or her offer
Can be made at any time before acceptance
Can be made even if they said they’d keep the offer open
Must be communicated to the offeree by the offeror or by a reliable third party
Exception:
- offeree has paid to keep offer open, collateral contract, offeree can claim damages
- unilateral contract
What is a unilateral contract?
One made to the whole world
It would be virtually impossible to revoke
What is lapse of time?
Offer ceases to exist if not made within a specific time limit
If no time limit, then lapse after a reasonable time
Lapses on death of offeree
What is failure of a pre-condition?
A ‘conditional’ offer is one depends on a specified event or change in circumstances
If not met, offer over
What is acceptance and how is it done?
Unequivocal and unconditional assent to all terms of the offer
Can be verbal, in writing or inferred by conduct
Silence is not acceptable
Acceptance must always be communicated unless offeror dispenses with that requirement
What are the timings of acceptance, due to methods?
Fax - communicated when it is RECEIVED by a person (in business hours)
Post - acceptance as soon as the letter is posted!
- applies even if the letter is never received, unless contract says otherwise
- revocation only made when letter received
Email - when acceptance is received by offerer’s email system and available to read
What is consideration?
Act or forbearance, price of a promise
Price by which one party bought the other party’s act or promise
Simple contracts - necessary
Deeds - not necessary
Must be SUFFICIENT but not necessarily ADEQUATE
Sufficient means capable of being given a value
Types of consideration?
Executed
- a performed act at time of agreement
Executory
- promise given in exchange for promise
Forbearance/waiver of rights
- one of the parties forfeit rights to something, consideration if can be assigned a value!
What is not good consideration?
Past consideration
- unless in response to a specific request
Existing statutory duty
- has to be over and above that
Existing contractual duty
- unless exceeded
- or new contract with third party
- or contract gives additional practical benefit not anticipated
Promise to do an illegal act!
Waiver of existing debt (part payment)
- payment if a lesser sum cannot do
- exceptions:
- alternative consideration
- bargain or agreement between creditors
- payment by third party
What are the two presumptions in the intention to create legal relations?
Domestic relations
- no intention to be legally bound in a social or domestic arrangement
- can be overturned with clear evidence
- presumption rebutted if spouses were not living happily together at time of agreement
Commercial agreement
- Intention TO be legally bound
- can be overturned with evidence (reluctantly by court!)
Subject to contract - presumption there is no intention to create an immediately binding contract
What is privity and the exceptions?
Only the parties to the contract can enforce/ be sued under it
Exceptions:
- Contracts (Right of Third Parties) 1999. A person can enforce if contract was for their benefit, and they were identified expressly by name of description
- Trust. Beneficiary can enforce a trust to enable them to enforce their rights
- Agency. Principal and third party have enforceable rights under that contract
What is a term v representation?
Term - part of the contract
Representation - something said by the offeror to induce the offeree to enter into the contract. Become a term once included in the written contract
- remedies can be claimed for misrepresentation
What are express terms?
Specifically agreed
Written, oral or combination
Specifically inserted into contract
Must be clear to be enforceable
What are implied terms and the four types?
Not expressly included
- Implied due to type of contract
- Implied to give business efficacy (make the agreement work)
- Implied due to custom and usage
- Implied by Acts of Parliament/statute/courts
What is the factual matrix?
When, in dispute between contracting parties, courts looks at the contract objectively to determine which terms should apply
